Producers or firms, quite naturally, would always like the market price to be higher. In certain markets, they are sometimes able to convince
government bodies that higher market prices are so important that the government should do something to force
them higher. Such price support programs are unusual in the
U.S. economy, except in agriculture where they are common. Some of
these programs are fairly complex in nature, but we can explore
the basic idea with a simple notion known as a price floor.
A price floor, in its simplest form, is just a law or policy that attempts
to guarantee that the market price will not drop below some predetermined level. Let's look at some
of the effects of such a policy.
Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved